Compare your current gas and electricity bills with those you received in 2009 and you’re likely to receive a nasty shock. While current utilities prices are still below 2012 and 2013 levels, there’s no getting away from the fact that wholesale energy prices have risen significantly since 2009, and are unlikely to return to their former levels.
But why this increase and what can business owners do about it?
Why are energy prices higher?
There are two main drivers behind the higher prices.
Firstly, we’re a small island which buys in much of its gas and electricity supply, so the price we pay for power is affected by global issues. And the energy market is like the money market – it doesn’t like uncertainty. Prices tend to go up when there is a question mark over supply – President Putin has used Russian gas supply as bartering power in the recent Ukraine crisis. Add to that the ongoing turbulence in Iraq and the Middle East and you’ll see there’s been impact on the energy markets on an almost day-to-day basis.
The second factor that has caused an increase in business energy prices is Government policy and taxation. The UK Government has signed up to European greenhouse gas emission reduction targets, so wants businesses and consumers to use less. In recent years we’ve seen the addition of the Renewables Obligation tax as well as the Feed-in Tariff – so there are new tax-based elements on your business energy bills.
What can be done to reduce the cost of business energy?
Like consumers, businesses need to shop around for the best price and contract terms when negotiating a new energy supply. It’s the only way to ensure you’re getting the right deal for your business.
Judging what’s a good deal depends upon market knowledge and understanding. No-one can predict with absolute certainty whether prices are going to continue to go up or stay the same, but you do tend to develop a good judgment by watching the markets over a period of time. That’s why we always include monthly energy price trackers in our monthly newsletter (sign up here).
It’s also sensible to look at your energy consumption and reduce usage where possible. There are usually some quick, easy wins that businesses can achieve. Ongoing reductions are more difficult, of course, but it’s a question of understanding the energy intensive aspects of your production process and ironing out inefficiencies where they occur.
A continual focus on energy efficiency by the senior management team is usually a pre-requisite of success as it allows the people on the ground, those who are implementing non-efficient processes, to come up with energy saving ideas. A continual focus on energy efficiency is less easy to achieve than you would think, but once the results start to be realised there is often a snowball effect!
If you are concerned about the cost of your business energy supply, please get in touch. We offer a range of services, from energy purchasing through to energy efficiency consultancy, invoice validation and legal compliance.